Huntington Ingalls Beats Q2 Street Expectation, Reaffirms FY23 Guidance

Huntington Ingalls Industries Inc HII reported a second-quarter FY23 sales and service revenue increase of 4.7% year-over-year to $2.79 billion, beating the consensus of $2.73 billion.

EPS was $3.27 compared to $4.44 in 2Q22, beating the consensus of $3.14.

Operating income declined by 18.3% Y/Y to $156 million, and the margin contracted by 158 bps to 5.6%.

Segment operating income was $169 million (-25% Y/Y), and the margin contracted by 240 bps to 6.1%.

Revenues by segments: Ingalls Shipbuilding $664 million (+0.9% Y/Y), Newport News Shipbuilding $1.51 billion (+5.3% Y/Y), and Mission Technologies $645 million (+7.5% Y/Y).

Huntington Ingalls's operating cash flow for the first six months totaled $73 million, compared to $184 million a year back.

"We continue to make progress on our top priorities of consistent shipbuilding execution and driving growth at Mission Technologies. The teams at Newport News and Ingalls continue to hit important shipbuilding milestones and Mission Technologies secured another quarter of robust growth and record revenue generation," commented Chris Kastner, HII's president and CEO.

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New contract awards in 2Q23 were ~$2.6 billion, bringing the total backlog to approximately $46.9 billion as of June 30, 2023.

FY23 Outlook reaffirmed: Huntington Ingalls Industries sees Shipbuilding revenue of $8.4 billion-$8.6 billion, and the corresponding operating margin of 7.7%-8.0%

It sees Mission Technologies revenue Of ~$2.5 billion, with operating margin of 2.5%-3.0%, and Mission Technologies EBITDA margin of 8.0%-8.5%

HII expects a Free Cash Flow of $400 million-$450 million and continues to expect cumulative FY20-FY24 free cash flow of ~$2.9 billion.

Price Action: HII shares traded higher by 1.61% at $231.48 on the last check Thursday.